Steve Richards: Immigration is opening up all those issues that the Government would rather forget

It is expensive to get the million excluded in Britain to work compared with employing a bunch of Poles

The Home Secretary, John Reid, has pleased virtually no one in placing restrictions on those seeking work from Bulgaria and Romania. Liberal newspapers and pro-European MPs fume at the pandering to ill-informed prejudices. Conservatives and right-wing newspapers condemn the measures as far too puny, another meaningless eye-catching initiative.

The Government used to triangulate with a timid, fearfully effective artfulness: we are not old left or far right. You can be safe with us! Now it triangulates with a clumsy defensiveness. We will be tough on new immigrants, but not very tough.

The lack of political deftness reflects the weird sense of limbo at the top. The Cabinet is split over the issue. Foreign Office ministers despair that Britain has moved against the spirit of enlargement that it had espoused so strongly. In the past, Tony Blair would have got a grip. But he will be gone by the time that the consequences of further enlargement make an impact. For now, Gordon Brown has other matters on his mind too. On several fronts, the Government stumbles when it should be striding confidently.

But while the decision is politically clumsy, it is not wrong. Reid had no choice but to put in some short-term precautionary restrictions. For several reasons, Britain is not ready yet to cope with another sudden influx of very large numbers from Eastern Europe. It is depressing that this is the case, and Reid would have been better placed if he had adopted the tone of acting more in sorrow than machismo. But he had to act.

The pivotal question is why some immediate restrictions are necessary. The answers open up a challenging political agenda for the next decade, one that is rarely highlighted by political leaders as they waffle safely about apolitical themes.

Immigration from Eastern Europe has changed beyond recognition the debate about social exclusion in Britain. The Government estimates that around a million people are disconnected from schemes such as SureStart and other welfare to work initiatives. In 1997, Blair and Brown put the case astutely that the economy would benefit from "productive spending", getting people back to work in a way that saved on welfare costs and brought in higher tax receipts, a benevolent double whammy.

The case is much harder to make now that the economy soars as a result of cheap labour from Eastern Europe. It is relatively expensive and arduous to get the million excluded in Britain to work compared with employing a bunch of keen Poles to tackle the drains.

The social and economic consequences lead unlikely people in unusual directions. Some senior Conservatives dare to ask privately whether forms of protectionism are necessary in order to get the indigenous population back to work. They accept that in raising the question they move close to Tony Benn's alternative economic strategy of the early 1980s, in which import controls were a central feature. Yet they wonder now whether there is any alternative to controls on the flow of labour.

From the other side of the political spectrum, the Labour MP and deputy leadership contender, Jon Cruddas, warns about the political dangers of low wages being cut further by immigrants. He fears that the BNP flourishes already because of the lack of decent affordable housing and well-paid work. The housing crisis is one of the great under-reported issues, but it impacts on everything from the provision of decent public services to high levels of crime in some areas. A sudden increase in population would heighten further the huge demand for adequate accommodation in some areas.

I am not arguing for the barriers to go up, but the fact that such measures are being contemplated in the main parties illustrate the scale of the challenge. Social exclusion is not going to be resolved by politically safe exhortations about the values of family life or by the efforts of the newly fashionable voluntary sector alone. A combination of government, local authorities, schools, innovative charities and new housing initiatives will be required, along with the existing plethora of policies including the minimum wage and tax credits that reward work.

Nor is it likely that public services would cope with the strain of another sudden leap in demand. Labour has reversed the decline in public services that were so decrepit in 1997. But that must be only the beginning. Still the services creak precariously, and the next public spending round will be much tighter. Just as the Government matches average EU spending on some services, it starts to climb back down the mountain.

Other countries have benefited from such spending for decades. Britain tries it for a few years, panics that the investment is a waste, and imposes the familiar cuts again. Until public services, schools, hospitals and transport are more robust, Britain cannot be laid-back about additional demands on its fragile infrastructure.

Which is a political tragedy, because Britain was united about the benefits of enlargement. Even in the 1990s, when the Conservatives were tearing themselves apart over Europe, there was consensus across and within the parties that enlargement was the way froward. Even when infected by extreme Euroscepticism, the Conservatives could still make a theoretical case for an enlarged Europe. Meanwhile, Blair and Brown have spent much of their time patronising the rest of the EU about enlargement and the importance of free and flexible labour markets. Now they become less flexible because of enlargement.

Europe forms the final part of the hidden agenda exposed by this week's announcement. From a European perspective it is a humiliation, which is why the Foreign Office has been so concerned. The champions of enlargement cannot cope with the consequences. At the very least this calls for a period of constructive humility from Britain within Europe. Britain got it wrong on Iraq, and now we have no choice but to establish an inflexible labour market having lectured Europe about flexibility. It is time for Brown to say something positive about Europe and Cameron to work with allies rather than break away.

The restrictions on Bulgarians and Romanians announced this week are relatively small, yet they inadvertently reveal what matters in British politics. While leaders proclaim about important but safely cross-party issues such as energy, security and the environment, here is the real, complex and highly charged agenda: Europe, housing, social exclusion and the level of investment in public services in less benevolent economic circumstances. Once they are addressed, Britain will be strong enough to thrive from what should be an exciting and positive development, the freedom to move and work within Europe.

s.richards@independent.co.uk